How I Automate Credit Spreads Stop Losses (Live Example)

10% Credit Spreads
3 min readNov 8, 2023

--

I’m excited to share a game-changing strategy which will help you automate credit spreads to make your options trading experience smoother and more efficient. We all know that successful trading relies heavily on risk management, and this includes setting up stop losses to protect our positions. But what if I told you there’s a way to automate your vertical credit spread stop losses? In this article, I’m going to show you exactly how to do it.

The Importance of Stop Losses For Credit Spreads

Before diving into the automation process, let’s quickly recap why stop losses are crucial in options trading. When you open a vertical credit spread trade, you’re essentially making a bet that the underlying asset’s price will move in a specific direction within a given timeframe. However, markets are unpredictable, and sometimes your trades may go against you.

A stop loss acts as a safety net, limiting the potential loss on a trade. Traditionally, managing stop losses involves continuous monitoring and manual intervention when a trade reaches a predefined threshold. While this approach works, it can be time-consuming and occasionally prone to human error.

How To Automate Credit Spreads Stop Losses

The good news is that some brokerage platforms, like Tastyworks and Thinkorswim, allow you to automate your vertical credit spread stop losses. Here’s how you can do it:

  1. Choose a Broker with Automation Features: Start by selecting a broker that provides automation features for options trading. Not all brokers offer this service, so it’s essential to choose one that aligns with your preferences.
  2. Understand Your Broker’s Interface: Familiarize yourself with your chosen broker’s trading platform. Different brokers may have slightly varying interfaces and procedures, so it’s crucial to understand the nuances of your specific platform.
  3. Set Up Stop Loss Orders: Once you have an account with a broker offering automation features, you can easily set up automated stop loss orders. Go to your options trade, click on the trade you want to set a stop loss for, and find the option to set a stop limit order.
  4. Determine Trigger and Limit Prices: When setting up a stop limit order, you’ll need to specify two prices — the trigger price and the limit price. The trigger price is the price at which your order gets initiated, and the limit price is the price at which you want to execute the trade. These prices are crucial, so make sure you choose them carefully.
  5. Confirm and Monitor: Double-check all your settings to ensure they match your trading strategy and risk tolerance. After confirming, your stop loss order is set. Now, you can relax knowing that your positions are protected automatically.

The Benefits Of Automating Credit Spread Stop Losses

Automating your vertical credit spread stop losses offers numerous advantages. Here are some of the key benefits:

  • Emotion-Free Trading: Automation removes the emotional aspect from your trading decisions. You no longer need to constantly monitor your positions, which can lead to impulsive actions.
  • Consistency: Automation ensures you stick to your predefined trading plan and risk management strategy consistently. This consistency is often a hallmark of successful traders.
  • Time Efficiency: Automating stop losses frees up your time. You can focus on research, strategy development, and other trading activities, rather than constantly watching the markets.
  • Risk Management: Automated stop losses provide an extra layer of risk management. In turbulent markets, where prices can change rapidly, automation can be more effective than manual interventions.

Trade Smarter Using Credit Spreads And Automation

Automating your vertical credit spread stop losses is a game-changer in the world of options trading. It allows you to trade more efficiently, reduce emotional decision-making, and stay consistent with your risk management strategy.

By selecting a broker that offers automation features, understanding the platform’s interface, and setting up your stop loss orders effectively, you can significantly enhance your trading experience. In the dynamic world of options trading, this smart approach provides you with the tools you need to succeed.

Learn how I completely automate my credit spreads trading using a proven indicator and algo that generates alerts based on the indicator (plus I’ll give you the algo and indicator for FREE in this training)

Thanks for reading 🙂
Austin Bouley

--

--

10% Credit Spreads

I help people who work-full time or have a family make 10% a month using credit spreads! If you don't make money with my alerts and strategies, I refund you :)